A new fixed costs regime has come into force in England and Wales for some types of litigation.

Jagdeep Sandher, head of dispute resolution at Leamington Spa solicitors Blythe Liggins, explains the implications.

The context

There has been a regime of fixed costs in litigation for some time but this has been very limited.

The new fixed cost regime dramatically increases the scope and means that this is likely to apply to less complex cases where the sum sought is between £25,000 and £100,000 where there are no issues of fraud, or £10,000 for personal injury cases.

What is the effect and how does this work?

The effect of these changes is to limit the costs risks to the parties involved in litigation and to fix them for each phase of the case, irrespective of whether the costs go over the limit of that phase.

The amount of potentially recoverable costs depends on what banding the case is allocated to. There are four bands and a case will be allocated to a particular band depending on its complexities.

It is generally for a judge to allocate a case to a particular banding, but there will no doubt be significant disputes between parties looking to have their case allocated to a higher banding to aid with costs recovery if they are successful.

The pros and cons

The benefit of a fixed costs regime is that each party will know at an early stage what its potential costs risk is and allows that party to budget and mitigate such risk.

However, the downside can be where costs actually incurred exceed the recoverable costs. This means that if successful and costs exceed recoverable costs, the successful party may be left out of pocket.

Broadly, the fixed costs regime is positive for those that find themselves in disputes as it allows an early stage risk assessment.

It may also push the parties to consider alternative dispute resolution at a much earlier stage which means that those disputes can be settled with limited costs being incurred.

The fixed costs regime also allows for the recovery of a percentage of damages being sought. The percentage will depend on what stage of proceedings the case settles at but can be as high as 40 per cent.

That will no doubt get parties thinking about settlement at an early stage.

Need advice?

If you find yourself in a position where you are involved in a dispute and would like to discuss your options and your potential costs risks, feel free to contact us by calling 01926 831231.

CAPTION:  Jagdeep Sandher, head of dispute resolution, at Leamington Spa solicitors Blythe Liggins.